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Commons Chamber

Volume 124: debated on Tuesday 8 December 1987

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House Of Commons

Tuesday 8 December 1987

The House met at half-past Two o'clock

Prayers

[MR. SPEAKER in the Chair]

Oral Answers To Questions

Defence

European Fighter Aircraft

To ask the Secretary of State for Defence what is his latest estimate of the number of European fighter aircraft the Royal Air Force requires.

The Parliamentary Under-Secretary of State for Defence Procurement
(Mr. Tim Sainsbury)

It is too early in the project to forecast with certainty the eventual size of a United Kingdom purchase of European fighter aircraft. The work-sharing agreement for development is, however, based on the declared requirement for 250 aircraft.

Does the Minister accept that unless the Government give a firm commitment to purchase 250 aircraft, the unit cost of each aircraft might make its eventual cost prohibitive to some of the nation? If the order is to go ahead, it requires a firm commitment from the Government to purchase 250 aircraft. Will the hon. Gentleman say when development work on the EFA is likely to start?

I hope the hon. Gentleman will recognise that it is difficult to give a firm order to purchase an aircraft until there is an aircraft design to purchase. Therefore, it is too early to give such a commitment. I hope that development work will start early next year.

Has my hon. Friend any long-term plan for when the aircraft will become operational, and will he say when it will go into service with the RAF?

Trident

To ask the Secretary of State for Defence what is the current and projected number of people employed on the Trident project.

We estimate that, in the financial year 1987–88, 12,000 direct and 10,000 indirect United Kingdom jobs are being sustained by the Trident programme. The number of jobs will rise to a peak of 15,000 direct and 12,000 indirect over the next few years.

Does my right hon. Friend agree that those statistics confirm that the Trident programme is a first-class investment for creating jobs and safeguarding the defence of our country? Furthermore, does he agree with the right hon. Member for Manchester, Gorton (Mr. Kaufman) that it is high time that the Labour party changed its defence policy?

I agree with my hon. Friend that the defence policy, such as it is, of the Labour party is looking particularly unconvincing at the moment. My hon. Friend is correct that Trident is a good investment. No amount of investment in conventional weapons would come remotely near to providing the security and defence that the Trident programme will offer us.

Will the Secretary of State reflect on the possible implications for the Trident programme of the INF agreement and further deliberations on strategic arms reductions? Will he comment on an article in The Daily Telegraph today, which says that the agreement between ourselves and the United States is of a commercial nature, not intergovernmental, and that, therefore, the security of that arrangement is not good in view of the United States' intention to reduce strategic arms?

With regard to today's events, the hon. Gentleman may have noticed that last year Mr. Gorbachev said publicly:

"We decided today to withdraw completely the question of French and British missiles and let them remain as an independent force, let them increase and be further improved."
Thus, that is not in question in today's decision.

As to the second half of the hon. Gentleman's question, we have been given perfectly full assurances by the United States Administration that they will fulfil in full the requirements that we have asked of them on the Trident system.

I thank my right hon. Friend for speaking to my constituents after he visited Barrow last week. Will he confirm that the Trident project is providing jobs for many subcontractors around the area, and that it is vital to the economy of the north-west?

I thank my hon. Friend for his comments. There is no doubt that the progress that has been made on HMS Vanguard and HMS Victorious at the shipyard in Barrow is extremely good. It is a good job and I have no doubt that it is providing a lot of jobs in the area.

Is it not a fact that if the Americans and Russians agree, as is quite likely, to a 50 per cent. across-the-board cut in each other's strategic systems, it will mean that the United State's navy will have 12 Trident submarines? If the Government go ahead with their purchase from the United States, the Royal Navy will have four Trident submarines. Does the right hon. Gentleman believe that, with the Royal Navy having the equivalent of almost one third of the American submarine strategic force, the Americans, let alone the Russians, will allow that position to continue?

There are a lot of ifs in that question. The fact remains that the American Administration and the contractors in America have given the firmest assurance that their contractual obligation to us under the Trident programme will be fulfilled, whatever the circumstances.

Does my right hon. Friend agree that we will welcome whatever agreements are reached between the Soviet Union and the United States? Even if they agree to a 50 per cent. reduction in strategic weapons systems,the fact is that many of the American weapons systems are land-based. The right hon. Member for Llanelli (Mr. Davies) chose to ignore that. Even if the United Kingdom possessed four nuclear submarines and the United States had 12, the balance would be more than made up by the American land-based systems.

My hon. Friend is perfectly correct. The agreement refers to land-based systems, not to submarine-launched systems. There is also the great assurance that I have quoted from Mr. Gorbachev, who said that the British system was in no way involved in the discussions.

Royal Ordnance

3.

To ask the Secretary of State for Defence if he will make a statement on the implications for competitive procurement for his Department arising out of the reorganisation of Royal Ordnance plc.

Decisions on the internal reorganisation of Royal Ordnance plc are a matter for the company. We do not expect the company's recent announcements to have any effect on the procurement decisions of the Ministry of Defence and we will continue to pursue our policy of maximising competition at both main and subcontract level.

Following the reorganisation of Royal Ordnance plc, is the Minister entitled to expect some improvement in the level of tender submitted by the company, given the National Audit Office figure of a £37 million discount to British Aerospace on the disposal of Royal Ordnance plc?

The price that the Government obtained for the disposal of Royal Ordnance plc was a good one. It was a competitive purchase. The value of assets is clearly what the purchaser will pay for.

I support competitive procurement, but will my hon. Friend note the importance of that major employer to the city of Nottingham? Will he also welcome the custom and practice of the present management in keeping not only staff fully informed of what is going on but, happily, also local Members of Parliament?

I am well aware of the importance of Royal Ordnance plc to Nottingham, and I welcome what my hon. Friend has said. I hope that the continuing improvements in efficiency by the company will provide it with wider opportunities to develop its market, including its export market.

In view of the conclusion in the report of the National Audit Office that the Royal Ordnance factories were substantially undersold because of the rush to privatisation, will the Minister comment on the fact that British Aerospace stands to make up to £100 million on the sale of the factory in Enfield alone?

I do not accept the premise of the hon. Gentleman's question that the Royal Ordnance factories were undersold. As I said earlier, it was a competitive purchase, and a good price was paid.

On 2 April this year my right hon. Friend the Secretary of State announced that negotiations were under way with Royal Ordnance for the exclusive supply on long-term contracts of propellants, explosives and some ammunition. As other British companies are capable of supplying some of those products, does that covert deal not drive a coach and horses through the policy of competitive tendering?

Last year, in the House, my right hon. Friend the Secretary of State referred to arrangements for long-term contracts for the supply of propellants, explosives and ammunition. We are aware of the interest of other British companies in the supply of such products, we are in touch with at least one other company, and we are awaiting proposals, which will certainly be carefully examined.

North Atlantic (Naval Strategy)

4.

To ask the Secretary of State for Defence if he will make a statement concerning Royal Navy strategy in the north Atlantic.

The Royal Navy's strategy in the north Atlantic was described in the 1987 Statement on the Defence Estimates, at paragraphs 404 and 405, to which I have nothing to add.

Will not the Royal Navy's strategy be subsumed by the interests of the United States because of the deployment of sea-launched cruise missiles? Is it not a fact that even the Navy's rules of engagement are being changed to suit the interests of the United States rather than British interests? Will the Minister come clean about this?

The strategy of the Royal Navy is part of the strategy of the navies of NATO, and the rules of engagement, like all other aspects, are resolved within NATO by agreement between all its members.

Does my hon. Friend agree that the Royal Navy's strategic options have broadened somewhat since 1979 in view of three facts: in 1979 we had not a single carrier-borne fixed-wing aircraft—[interruption]

I was asking my hon. Friend whether our strategic options had broadened since 1979, as then we had no carrier-borne fixed-wing aircraft, only one frigate in the Royal Navy with a hard kill anti-missile system and no credible modern torpedo suitable for modern warfare on any of our submarines.

It is our policy to keep the Royal Navy up to date. Indeed, that is why we have been introducing so many new ships. Since the Government came to power in 1979 we have ordered 60 major ships for the Royal Navy, about half of which have still to enter service. Ten of the ships still on order are frigates, and the value of the investment represented by ships still on order is £4 billion.

The Minister said nothing about the need for modern and adequate mine-counter measures, which seems incredible in view of fairly recent developments. Can he assure the House that these will be available by the early 1990s, given the present very unsatisfactory state of the modernisation programme?

I am glad that the hon. Gentleman recognises the importance of mine-counter measure vessels, as do the Government. As the hon. Gentleman will know, we have a programme of introducing Hunter class and single role mine hunters, and the success of our vessels in the Gulf has shown how very good their equipment and manpower are.

Will the Minister outline the attitude of the other northern members of the Alliance who are participating in the review of combined maritime policies and tell the House whether they support Britain's attitude of slavish acceptance of United States maritime strategy in northern waters?

The whole maritime strategy of all partners in NATO in the NATO context is defensive.

Stockholm Document

5.

To ask the Secretary of State for Defence if he is satisfied with the application of the inspection arrangements agreed under the Stockholm document.

Yes. The Stockholm document is concerned with confidence-building in Europe through greater transparency in military activities. The provision for verification of compliance, through on-site inspection by participating states, is a significant way of achieving greater trust and confidence on all sides.

I am grateful to my right hon. Friend for that answer. Has he yet considered any challenge inspections or even observation inspections of Soviet military exercises? Does he consider that any of the forthcoming exercises are suitable for a challenge?

Yes, we have indeed considered challenge inspections. Looking to next year, we have an indication of notifiable exercises. The figures available to date indicate that there will be seven observable exercises in the Warsaw pact countries — three in the German Democratic Republic, two in Czechoslavakia, one in Hungary and one in the USSR. On our side, there will be nine suitable exercises in NATO countries—seven in the Federal Republic of Germany, one in Denmark and one in Norway—and two in Switzerland.

Given that we accept that confidence-building is so important, is the Secretary of State aware that last Thursday nuclear warheads were brought into the cruise missile base at RAF Molesworth, that last night that base was put on black alert—which I understand is the highest state of alert—and that, because of the presence of police, we must assume that a convoy run was being planned? Does he really think that that is in the spirit of detente surrounding the signing of the INF treaty today? Will he guarantee that no further exercises of that kind will take place in this country and that, following the INF agreement, to which we look forward, there will be no increase in American-owned nuclear weapons coming into Britain?

I appreciate the hon. Lady's question, but I can neither confirm nor deny any of the facts that she has suggested; and, with great respect to her, they bear no relation whatever to the question.

Is it acceptable to my right hon. Friend that any inspection teams representing Warsaw pact forces should he comprised of members who have formerly been banned from Britain for alleged acts incompatible with their diplomatic status?

I understand that any personnel who have been declared persona non grata would not be acceptable on inspection teams.

Inf Agreement

6.

To ask the Secretary of State for Defence if he will directly discuss with the Union of Soviet Socialist Republics ways of reducing minimum nuclear forces following the signing of the intermediate nuclear forces agreement.

17.

To ask the Secretary of State for Defence if he will directly discuss with the Union of Soviet Socialist Republics ways of reducing minimum nuclear forces following the signing of the intermediate nuclear forces agreement.

There are regular exchanges between the United Kingdom and the Soviet Union on nuclear arms control issues.

Why cannot Britain enter into bilateral talks with the Soviet Union on nuclear disarmament? Is it the Prime Minister who is blocking the progress of negotiations with the Soviet Union on nuclear disarmament agreements?

We do, as I have said, have discussions with the Soviet Union about arms control matters, but negotiations have been through the superpowers. I may add that if the hon. Lady's views, as expressed in the motion to which she put her name recently, were to be carried out, Britain would have no nuclear weapons and so would have no role in discussing and influencing the reduction of nuclear weapons in the world.

Will my right hon. Friend take this opportunity to welcome the INF agreement and to confirm that it would never have come about if the Opposition's policies had been pursued?

My hon. Friend is absolutely correct. If I had taken the Opposition's advice, and, indeed, that of CND, there would be no cruise missiles in Britain or Western Europe today and there would be a huge battery of them lined up pointing in our direction from the other side.

Does the Secretary of State have any cause to fear that although the Soviet Union may abide by the letter of the treaty, it may seek to undermine it by further nuclear deployment? Will that fear be more or less likely to be fulfilled if NATO goes about making compensatory adjustments and arrangements?

Of course, there is concern in some quarters as to whether both sides will keep the agreement. I can only tell the hon. Gentleman that NATO—and I believe the Soviet Union, too—is determined to keep to the spirit and the letter of the agreement. NATO has no intention to substitute for the weapons that have been removed.

I am sure that all will agree that today's agreement is historic in every way, but can my right hon. Friend yet tell us the implications of the agreement for the deployment of cruise missiles in Britain?

Yes, Sir. The agreement about to be signed in Washington is fully supported by the British Government and it has been warmly endorsed by all the United States' allies. Once the INF treaty has been ratified and comes into force, missile withdrawals will start and will be phased over a three-year period. Meanwhile, the normal training pattern will continue. During that time, six operational flights of ground-launched cruise missiles will be withdrawn from RAF Greenham Common and one operational flight from RAF Molesworth. I expect that the Molesworth missiles will be among the first weapons on the NATO side to be withdrawn.

Will the Secretary of State now confirm that, as stated in The Daily Telegraph editorial today, there is no formal agreement between the United Kingdom and the United States on the supply of Trident missiles? If a future American President, as part of STAR talks, were not to supply those missiles, the British Government would have no redress.

I do not agree with the right hon. Gentleman at all. We have had the clearest possible assurances from the United States Administration that they regard themselves as committed to provide what they have undertaken to provide for our Trident programme. That is the end of the matter.

World Peace Council

7.

To ask the Secretary of State for Defence if he has received representations about the implications for his policy on arms control of the policies propounded by the World Peace Council, a copy of which has been forwarded to him.

The so-called World Peace Council opposes the concept of the nuclear deterrent, which is an essential foundation of our defence policy. Opposition Members and their supporters lose no opportunity of supporting its approach.

Will my hon. Friend take a shovelful of Siberian salt to the examination of the so-called Auckland declaration, issued by the World Peace Council, which is, of course, Soviet-backed, although four Opposition Members are members of the British arm? Is it any surprise to my hon. Friend that the declaration does not contain any condemnation of the occupation of Afghanistan? Does my hon. Friend agree that if we had followed the policy of not deploying cruise and Pershing missiles into Europe in the first place we should not be having today's INF agreement?

My hon. Friend does well to remind the House of the sorts of policies that are espoused by the World Peace Council. It is not surprising that it has not condemned the occupation of Afghanistan, because it supported the suppression of the Hungarians, the installation of missiles in Cuba and the invasion of Hungary.

It is clear that there would not be an INF agreement today if the policy of one-sided disarmament, espoused by the Labour party, had been followed, because there would not have been anything about which to have an agreement.

I have never at any time supported the World Peace Council. Nevertheless, is it not clear that the objectives of such a body are in line with the thinking of all sane people in the world—the removal of nuclear weapons from every country? Is it not clear that the people of this country, and, indeed, the world, see the INF agreement as only a first step? Is it not also clear that all of us must continue to work hard to get rid of nuclear weapons, beginning with this country, in line with Labour party policy?

I congratulate the hon. Gentleman on his non-membership of the World Peace Council. The council's policy of objecting to the nuclear deterrent goes against the interests of this country and of NATO, and should be rejected firmly by all hon. Members.

Does my hon. Friend accept that nuclear force reductions leave us increasingly vulnerable to imbalances in biological, chemical and conventional forces, especially when the Soviet Union is moving from labour-intensive to capital-intensive forces? Does he also accept that reductions must be achieved on an integrated basis and that, unless we achieve that in our agreements, we should be prepared to pay more for our defence?

My hon. Friend draws attention to an important factor. Although, as the hon. Member for Liverpool, Walton (Mr. Heffer) said, the INF agreement may be only the first step, it is essential that before long we should tackle the major issue of the imbalance in conventional forces and the threat of chemical warfare, which is so strong from the other side.

When the Minister sneers at those who do not believe in and want to get rid of the nuclear deterrent, is he sneering at the 121 nations that have signed the United Nations nuclear non-proliferation treaty? If any of the 121 nations that have renounced nuclear weapons, decide to obtain them because they believe that the Government are right and they want such weapons what will he say to them?

Unlike the hon. Gentleman, I do not sneer at anybody. I am merely pointing out that the nuclear deterrent is an essential part of our defence and that of our allies in NATO, and I suspect that it will long remain so.

Falkland Islands (Telephone Calls)

9.

To ask the Secretary of State for Defence what is the cost of telephone calls to and from service personnel in the Falkland Islands and Ascension Island.

The Parliamentary Under-Secretary of State for the Armed Forces
(Mr. Roger Freeman)

The cost of telephone calls from the United Kingdom for a British Telecom call is £2·30 per minute to the Falkland Islands for an operator-connected call, and £1·42 per minute to Ascension Island for a direct dialled call. The cost of calls back to the United Kingdom from both places is £1·50 per minute for a Cable and Wireless Plc direct dialled call.

Is my hon. Friend aware that, although our forces on the Falkland Islands and on Ascension Island are well-led, well-paid and all the other good things, communications are bad? One may telephone the United States for 81p a minute and Australia for £1·02 a minute, but our forces have to pay £1·50 a minute during the day, night, weekends and so on. Will he seek some form of concession so that our various forces at least pay a reasonable charge for communicating with their families?

My hon. Friend will appreciate that the rate is commercial and obviously has to be fixed by the company. I am glad to tell my hon. Friend that over Christmas and the new year there will be a discount of one third on calls back to the United Kingdom. I shall be glad to draw my hon. Friend's comments to the attention of my right hon. Friend the Secretary of State for Trade and Industry.

Defence of the Falklands is clearly reliant on royal fleet auxiliaries. Is it the Government's intention to procure AOR2 before Christmas?

I am sure that the hon. Gentleman would not expect me to comment on that matter.

Inf Agreement

10.

To ask the Secretary of State for Defence what enhancement measures Her Majesty's Government are considering in the wake of the intermediate nuclear forces agreement.

The composition and balance of NATO's nuclear forces is being updated continuously. We have to ensure that their credibility and effectiveness are maintained in the light of changing circumstances. As part of that process NATO is currently considering what adjustments, if any, might be required to its remaining forces following the elimination of ground-launched cruise missiles and Pershing missiles. There are a number of possible options, but no decisions have yet been taken.

Will the Minister supply a full list of the new measures by which he plans to increase the number of nuclear weapons? Will he also give an opportunity for the House to debate such matters, instead of carrying on such things in secret?

No proposals have yet been placed before NATO allies. Obviously, we shall have to discuss such proposals with our allies when they are put up. I have given the general background against which we shall consider them. I should have thought that the hon. Lady might have found a little time in her supplementary question today of all days to congratulate the Government on the success of their policy for reducing nuclear weapons, as the treaty will be sealed today.

Will my right hon. Friend also take into account the Soviet Union's intentions to modernise its nuclear forces and, at some suitable time, publish a list of such projects?

My hon. Friend is perfectly correct. The Soviet Union, as long as it thinks it must have such weapons, wisely keeps them updated all the time. We carefully watch what it is doing. Some useful publications have been produced. I understand that the American Administration will soon produce another publication.

I warmly welcome the development of the INF agreement. Will the Secretary of State advise whether he is looking at the option of replacing land-launched missiles with sea-launched cruise missiles, which will probably be based on the Clyde? Does he accept that, given the history of Polaris and Poseidon and the advent of Trident, that would be an unacceptable burden for the people of Scotland?

I do not agree with any of the points that the hon. Lady has raised. It is no part of my intention to substitute the missiles that we hope will be removed as a result of the deal. At all times we shall have to look at the armoury of weapons that are available to us for our defence and make sure that they make sense, one with the other, and enable us to keep up a credible, flexible deterrent force. We shall have to look at that matter once the deal is concluded.

The figures that have been issued by the International Institute for Strategic Studies—I use the figures precisely because in the past they have been quoted approvingly by the Labour party—show an imbalance in favour of the Soviet Union of 2:1 in tanks and tactical aircraft and 3:1 in artillery. Will my right hon. Friend give a commitment on behalf of Her Majesty's Government that we shall not entertain any reduction in battlefield nuclear weapons unless there is real and verifiable progress on the part of the Soviet Union towards a balance of conventional arms in the north European plain?

My hon. Friend is quite correct, and I can give him that assurance. It has been made clear by my right hon. Friend the Prime Minister and my other colleagues on many occasions that before we would be prepared to go further into the reduction of battlefield nuclear weapons we would have to be convinced that there had been major changes in the conventional imbalance and, one hopes, that a worldwide ban on chemical and biological weapons had been concluded. We have none of such weapons, but the Soviet Union insists on keeping a large and increasing arsenal of them.

Does the Secretary of State agree that there is great scope for the German suggestion from Chancellor Kohl that there should be simultaneous talks about the reduction of battlefield nuclear weapons and conventional weapons? That is the way in which we should go forward after the INF treaty, which we all welcome, is signed this afternoon.

I am grateful to the hon. Gentleman for welcoming the INF treaty. I hope that he will reflect on the reason why it has been possible to conclude it.

The hon. Gentleman has said from a sedentary position that it had nothing to do with us. I presume that he is referring to the Labour party, because it certainly had nothing to do with it.

As regards the hon. Gentleman's question, I can confirm that the British Government's position has been made clear. We could not contemplate further discussions about battlefield nuclear weapons until we were satisfied that the conventional and chemical imbalance had been dealt with.

Does my right hon. Friend agree that it is odd to hear Opposition Members talking about the enhancement of weapons systems when, before the INF agreement that we are discussing today, they consistently advocated the unilateral weakening of our defences? Does my right hon. Friend agree that if we had followed their advice, and that of their friends, CND, we would not have made these major steps forward?

My hon. Friend is perfectly correct. If we had followed the advice of the Labour party we would not have had a deal today, and we would have had a whole range of nuclear weapons facing us to which we would have had no answer and which we would have had no prospect of negotiating away.

Exercise Purple Warrior

11.

To ask the Secretary of State for Defence what was the cost of Exercise Purple Warrior.

The estimated costs of Exercise Purple Warrior, additional to those which would have been incurred had the exercise not been taking place, are £7·5 million.

Leaving aside the dubious nature of an exercise that had nothing to do with defence and everything to do with plans for an invasion, presumably of a Third world country, and the fact that the Government had to hire merchant shipping vessels from Denmark and West Germany because of a savage reduction in the British merchant fleet, did the Minister consult his colleagues at the Department of Health and Social Security to discover whether that £7·5 million, properly spent on London and midlands hospitals, such as the Birmingham Children's hospital, might have resulted in fewer deaths in recent weeks because of the non-cancellation of heart operations?

By prudent financial management the Government have been able to increase public expenditure on both the Health Service and defence.

As for the hon. Gentleman's point that bore some relation to the original question—about the vessels hired for the exercise—I am glad in one way that British operators and their vessels were so busy that they had things to do other than take part in the exercise. As far as vessels being hired for the exercise are concerned, we pursue our policy of obtaining them on the best terms of availability, suitability and cost, and if British vessels were competitive, we should be glad to have them.

Will my hon. Friend confirm that most of us take the view that the exercise represented money well spent? It was particularly good to have observers from behind the Iron Curtain there who could observe how effective our ability to respond to a potential attack would be, and could therefore subscribe to our deterrent posture.

My hon. and learned Friend is right. The exercise was extremely successful in the rehearsal of amphibious landings and evacuation for an out-of-area operation, and in co-operation between the three services, which all took part. The arrangements for Warsaw pact observers were successfully and competently handled, and the inspection and observation of exercises of that sort play an important part in increasing confidence and reducing tension.

Inf Agreement

12.

To ask the Secretary of State for Defence to what arms control and disarmament negotiations he expects directly to contribute following the intermediate nuclear forces agreement.

INF negotiations have been conducted between the Soviet Union and the United States in close consultation with the NATO Alliance. The United Kingdom participates directly in a number of arms control fora, including the work of the conference on disarmament, which includes negotiation of a global ban on chemical weapons; the first committee of the United Nations General Assembly; mutual and balanced force reductions negotiations between NATO and the Warsaw pact in Vienna; and the conference on security and confidence-building in Europe, under which discussions are continuing on a mandate for negotiations on confidence and security-building measures and conventional stability.

I thank the Minister for that answer. Since the Prime Minister spent yesterday trying to cash in on the success of the INF talks—[Interruption.]

Thank you Mr. Speaker. As I was saying, since the Prime Minister spent most of yesterday trying to cash in on the success of the INF talks, will the Secretary of State for Defence now tell us that the Government are prepared to negotiate the removal of all nuclear weapons and that they are prepared to play a positive role in the disarmament negotiations rather than spend all their time and energy attacking the CND, which has done more to bring about the INF treaty—[Interruption.]

Thank you, Mr. Speaker. As I was concluding, will the Secretary of State also spend less time on anti-Soviet rhetoric and instead come to a serious discussion about the need to eliminate all nuclear weapons?

The object of all arms control reduction talks is to eliminate war and to bring peace by every means possible. The Government can now show remarkable progress towards those things. The hon. Gentleman is remarkably courageous in suggesting that the CND has any credit at all in this matter. If its advice had been followed we would have had no agreement and a much more threatening situation to face in future. My right hon. Friend the Prime Minister has every reason to be proud of the part that she has played in bringing about the reduction in nuclear weapons, which is greater than any previous reduction achieved under any Administration.

Is it not clear that the successful policy followed by Her Majesty's Government in conjunction with our NATO allies and pursued on the basis of the twin-track decision since 1979 has brought the desired results? Is it not also clear that the Government will have a valuable role to play in future in negotiating a verifiable, workable agreement to reduce the threat of chemical weapons?

My hon. Friend is correct. It is the twin-track decision that has brought about the agreement which we hope will be signed today in Washington. It is worth reminding ourselves that the Opposition opposed that decision root and branch and voted against it in the House.

Contract Costs

13.

To ask the Secretary of State for Defence what proportion of contracts are awarded on a cost-plus basis.

In 1986–87 about 6 per cent. by value of contracts were placed on the basis of cost-plus percentage fee for profit. The proportion has declined from 22 per cent. in 1980–81 and reflects the aim of introducing cost incentives into defence non-competitive contracts.

What proportion of Marconi's cost-plus contracts are the subject of the fraud inquiries by the MOD police? May I have an assurance that MOD police will not be restrained in any way or restricted in carrying out those inquiries? I can tell the Minister that I am handing the documents about fraud at Marconi that the MOD police also have in their possession to Sir Gordon Downey, the Comptroller and Auditor General, so that the Public Accounts Committee, too, can examine every area that the Ministry of Defence police are examining.

The hon. Gentleman will be aware from earlier replies on this subject that in this matter the Ministry of Defence police are under the direction of the Director of Public Prosecutions. I am glad to hear that if the hon. Gentleman has any documents that he thinks are relevant to these sensitive matters he will pass them not only to the Public Accounts Committee but to the investigating authorities.

Will my hon. Friend confirm that the Ministry of Defence policy of changing from cost-plus contracts to tendering has not only saved the Minister of Defence a great deal of money, but that that money has been used to buy other much needed conventional weapons?

I am glad to be able to confirm what my hon. Friend has said. The introduction of a greater degree of competition into Ministry of Defence contracts is not only saving the taxpayer money, but is giving the services more equipment for the same amount of money.

Nato (Ministerial Meeting)

14.

To ask the Secretary of State for Defence if he will make a statement about his last meeting with NATO Defence Ministers.

I met my NATO colleagues collectively at the regular meetings of the Eurogroup and defence planning committee last week. Copies of the communiques issued after the meetings have been placed in the Library of the House.

Will the Secretary of State tell us what plans he and NATO are putting forward to increase the pace of arms reduction and to get new arms agreements with the Soviet Union, or has he been spending most of his time, on behalf of the Prime Minister, trying to get more nuclear weapons into this country?

The hon. Gentleman is quite wrong. We have given, and are giving, the fullest support to our allies the United States in further negotiations, which we hope will take place speedily, for up to a 50 per cent. reduction in strategic missile systems. I would have thought that the hon. Gentleman might he prepared to support that.

Prime Minister

Engagements

Q1.

To ask the Prime Minister if she will list her official engagements for Tuesday 8 December.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today, including one with the Polish Foreign Minister.

Will the Prime Minister tell the House when her Government propose to abandon their vendetta against the BBC?

I am not aware of any vendetta against the BBC. The injunction is a matter that will shortly come before the courts again and, therefore, I can say nothing about it.

If, after her return from the Palace tonight, my right hon. Friend hears that an INF agreement has been signed in Washington, will she convey her congratulations to the American and Russian leaders? Will she also accept on behalf of all Conservative Members congratulations for what she and the Government have done in achieving this unique agreement and will she—[Interruption.]

—continue to remind the British public that if we had listened to the policies of the official Opposition there would have been no agreement, because they would have denied us the nuclear strength from which to negotiate it?

I am grateful to my right hon. Friend. I assume that the intermediate nuclear treaty will be signed today and I shall gladly convey the congratulations of my right hon. and hon. Friends — and, I hope, those on the Opposition side of the House — to the President and the General Secretary on the signing of that treaty, which is a historic event and is good news for us all. I shall also do my best to remind people that, but for the firmness of this country and NATO, that agreement would never have been signed, the SS20s would still have been up and we would have had no means of persuading —[Interruption.]—the Soviet Union to take them down.

Order. I ask the House to ask brief questions and to listen to the answers in silence.

I welcome the meeting that the Prime Minister had with General Secretary Gorbachev yesterday and concur with her view that the Washington summit is an occasion, as she put it, to plan the way forward to more arms reductions. Will the Prime Minister tell us what contribution her Government will make to that way forward?

We have already made a considerable direct contribution with regard to cruise missiles, having been the first to station the cruise missiles and, therefore, have had a great deal to do in bringing about that treaty. Secondly, we have made it clear several times that we are for a 50 per cent. reduction of Soviet and United States missiles. Thirdly, we have been very active in regard to chemical weapons, particularly in trying to find a method of verification. Fourthly, we have made it clear that there should be no further reductions of nuclear weapons in Europe until we are far nearer parity on conventional weapons, and chemical weapons have been eliminated. Fifthly, we have made the way clear about the anti-ballistic missile treaty and its relevance to SDI, and quite a number of other things besides.

In addition to various other steps, many of which are welcome, and some of which can be claimed with some justification, and in order to promote that way forward, may I ask the Prime Minister to drop any proposal to replace the intermediate land-based missiles, which will be removed as a consequence of the INF agreement, with sea or airborne intermediate missiles, either by innovation or by some so-called process of modernisation, as that act of replacement would clearly nullify the INF agreement that she so rightly celebrates?

The intermediate nuclear weapons treaty is for land-based missiles. With regard to all our other defences, we have a positive duty to see that they are modernised and effective. That is in accordance with the NATO Defence Minister's meeting held in California.

If that is essential, why should it involve the installation of intermediate nuclear missiles for delivery by sea or by air? Will the Prime Minister tell us why she should inaugurate a new generation of intermediate missiles, especially when she knows that the Soviet Union would respond in kind?

All weaponry has to be modernised so that it is effective against the defences that it might meet. That is a very simple reply, even though the right hon. Gentleman cannot understand it.

Does my right hon. Friend accept that it is very good to see the Leader of the Opposition, unlike many of his colleagues, expressing his congratulations to Mr. Reagan and Mr. Gorbachev and paying tribute to my right hon. Friend for her important part in the negotiations? Does she agree that NATO's next priority must be the destruction of Russia's chemical armoury and the verifiable reduction of the Warsaw pact's conventional forces? That is the first step that we must look to make now.

Yes, I am grateful to my hon. Friend. I have made it clear on many occasions that the next steps forward must be towards conventional parity, because the Soviet Union has far superior conventional forces to ours and we must try to negotiate those down. It also has a massive superiority in highly dangerous chemical weapons, not only in numbers, but they are all modernised and there are increasing stockpiles. That is the most difficult treaty of all to negotiate, because it is undoubtedly very difficult to verify that no chemical weapons are being produced, particularly when they can be produced in quite different factories in the new binary system, which is the common mode.

Q2.

To ask the Prime Minister if she will list her official engagements for Tuesday 8 December 1987.

I refer the hon. Gentleman to the reply that I gave some moments ago.

I hope that the Prime Minister will be as positive in her reply to me as she was in her replies earlier in Question Time. I asked the Prime Minister a question on 17 November about the National Health Service. I make no excuse for repeating it again. In addition, we have had a report from the Royal College of Surgeons, which includes the Queen's doctor. Will the Prime Minister reply to that positively and tell us what she intends to do? Everyone in the Health Service, doctors, nurses, surgeons and everyone else is complaining and wants the Government to do something positive. Why will the Prime Minister not do something positive now?

I think that the question that the hon. Gentleman asked was about restructuring pay for nurses. I think that he got the wrong end of the stick. He thought that it was a cut in nurses' pay. The restructuring arrangements are still being negotiated. We hope that the negotiations between the management side and the nurses will be completed this afternoon. In that case, the matter will be referred to the review body. I want to stress that the National Health Service has gone from strength to strength in the number of patients treated—[interruption.]

As for the number of patients treated, 5·5 million in-patients were treated in 1978, whereas in 1986, 6·5 million in-patients were treated. There were 34 million out-patient attendances in 1978. There are now 38 million. The number of operations, about which hon. Members often ask me, was 2,015,000 in 1978; it is now 2,360,000—nearly 1,000 extra operations every day. The National Health Service has increased in strength and doctors and nurses are doing more with the increased money.

Will my right hon. Friend note the support that she has received for her line on budget discipline during the Copenhagen summit? Will she confirm that she has wider support among the Commission and other member countries? Does she believe that, by the spring summit, France and Germany will have fallen into line with the long-term interests of the European Community?

I hope to make a brief statement on the European Council. I confirm what my hon. Friend said, that the Commission's proposal on agricultural stabilizers—a way of keeping down the surpluses—came very much towards our view. They were strict, and there were attempts during the summit to undermine them, which we resisted.

Q3.

To ask the Prime Minister if she will list her official engagements for Tuesday 8 December.

I refer the hon. Gentleman to the reply that I gave some moments ago.

It was important for the Prime Minister to be hostess to Mr. Gorbachev on his way to signing the historic INF agreement, but that did not include a single British-owned nuclear weapon. Did the Prime Minister take the opportunity to put those on the negotiating table for arms reduction, or did she restrict herself to being President Reagan's tea lady?

No. That agreement includes several flights of weapons stationed at Greenham Common and one at Molesworth, which of course will be withdrawn. Without them there would never have been an agreement on the part of the Soviet Union to take down an infinitely larger number of intermediate weapons than NATO yet has. With regard to the nuclear deterrent, Conservative Members believe that it is vital to our security to keep a British independent nuclear deterrent, and so do the British people.

Q4.

To ask the Prime Minister if she will list her official engagements for Tuesday 8 December.

No matter how strongly we hold views on abortion, will my right hon. Friend join me in condemning those who try through violence, intimidation and abuse to silence those who seek a reduction in the time limit in which an abortion can be obtained?

I know that there are very strong views on this matter on both sides of the House. I agree with my hon. Friend that it is absolutely vital that whatever those views they should be able to be freely expressed and we should be able to discuss and debate the matter in the same way.

Order. The hon. Member is the leader of his party and he has a right to be heard like everyone else.

—imbalance in conventional weapons in the context of INF and the possible need to modernise the nuclear component of our land, sea and air-based weapons, may I ask whether she considers that discussion on conventional disarmament could not be accompanied by discussions on battlefield weapons in the Vienna talks?

I think that it is best to keep the discussions on battlefield weapons separate, but we are very ready to take part, as we have done so far, further in the Vienna talks, with a view to trying to get the Russian superiority in conventional weapons much closer to the weapons the West possesses. It is absolutely vital to do that. One great advantage of the intermediate nuclear weapons treaty is that it shows that by strict negotiation, where the Soviet Union has more weapons than we have, we can get down that superior number of weapons, in the case of intermediate ones to zero, and in the case of conventional weapons to something much more like parity.

Q5.

To ask the Prime Minister if she will list her official engagements for Tuesday 8 December.

Is my right hon. Friend aware of the very widespread support for the Rates Reform Bill as a sensible way of reforming rates? In looking at some of the options that have been tabled, has she considered the banded community charge, and does she agree with me that it is nothing more than another form of local income tax, with all the disadvantages that would follow and it offers no accountability?

I believe that a banded community charge would just be income tax by another name. It would be yet another burden on income tax payers and would fall particularly heavily on people such as nurses, teachers and policemen. It would he immensely complicated, with marginal relief of all kinds. Income tax is paid and registered where people work, not where they live, so it would mean revealing a very great deal to the local authority, which many people would not like at all.

European Council (Copenhagen)

3.30 pm

With permission, Mr. Speaker, I shall make a statement about the European Council held in Copenhagen on 4 and 5 December, which I attended, together with my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs.

At the previous European Council in June, we had decided that
"the Community must submit the use of its resources to effective and binding discipline"
and adopt regulations
"to keep the level of expenditure within the budget framework."
Our principal task this time was to consider practical measures to give effect to these objectives.

Our discussions concentrated on three main aspects: first, the amount of spending and its control, with particular reference to agricultural spending; secondly, the level and objectives of the Community's regional, social and agricultural guidance funds; and thirdly, how the Community should be financed in the years ahead.

The first aspect is control of spending. I made clear to the House before Copenhagen our determination to see the Community's agricultural spending brought under proper control, together with measures to dispose of existing agricultural surpluses and prevent the build-up of new ones. I also made it clear that the most effective way to achieve our aim was by the introduction of agricultural stabilisers for each and every commodity.

We were able to go far in Copenhagen towards establishing the basis for stabilisers, which will impose automatic cuts in price support if agreed production levels are exceeded. All member states now accept that such stabilisers are needed. We made progress in particular towards agreeing tough stabilisers for cereals, oil-seeds and protein crops, on which spending has increased particularly sharply.

We also had before us a proposal, but only in very general terms, for a Communitywide set-aside scheme, which a number of Governments, including ourselves, support as a complementary measure to stabilisers. I am glad to say that the Commission's proposal for an oils and fats tax, which we had resisted strongly at the June European Council, was not further pursued.

On the second aspect, structural funds, the Commission had proposed a doubling of the resources devoted to those funds by 1992. In common with several other Heads of Government, I made it clear that this was out of the question. Our view is that growth of those funds must be contained within a strict framework of budgetary discipline, but that it would be right to concentrate a higher proportion of them on the less prosperous member states, particularly Spain and Portugal.

The third aspect was how the Community should be financed. We discussed proposals put forward by the Commission for restructuring member states' contributions to the Community budget in order to make the arrangements more fairly reflect national prosperity. Decisions on the future level of the Community's own resources will be taken only when improved budget discipline arrangements have been worked out in detail. I made it absolutely clear that we are not prepared to see any dilution of our Fontainebleau abatement.

Much credit is due to the fair, indeed courageous, chairmanship of the Danish Prime Minister, Mr. Schluter, for the progress which we made. None the less, the large number of issues to be settled, and the amount of detail involved, meant that we were unable to finish our work at this meeting, the more so because each Government naturally want to be able to judge the results as a whole.

The Council therefore adjourned and will resume its discussion under German chairmanship in Brussels on 11 and 12 February, building on the work done at the Copenhagen meeting. On foreign policy questions, we issued statements on East-West relations, Afghanistan and the middle east. Texts are in the Library of the House. We recognised the importance of the meeting between President Reagan and Mr. Gorbachev and of the INF agreement which will be signed at it.

We urged the Soviet Union to withdraw from Afghanistan by a set date in 1988, and to agree to the establishment of an independent, transitional Government there. We also called for action to enforce implementation of Security Council resolution 598 on the Iran-Iraq conflict by means of a follow-up resolution.

Heads of Government also discussed the world financial situation. We welcomed the agreement between the Administration and Congress to reduce the United States budget deficit. We confirmed our commitment to run our economies soundly, keeping down inflation and encouraging enterprise. We stressed the importance of taking the necessary steps to have a Europe free from trade barriers by 1992.

In conclusion, the Council represented a significant move in our direction, namely towards effective and binding control of Community spending. A great deal of work remains to be done before the next Council, but the United Kingdom's determination to secure such control is very well understood and will not change.

After the Copenhagen summit, may I welcome the Prime Minister's recognition that what she hailed as "an effective discipline" and a "lasting" agreement on the European Community budget at Fontainebleau in 1984 has, in practice, been neither effective nor disciplined and certainly not lasting. I also welcome the Prime Minister's report that there was a significant move towards an effective and binding control on community spending at the Copenhagen summit. Arising from that, may I ask the right hon. Lady what she intends to do before, and at the Brussels special summit in the New Year, to ensure that the move towards legally binding and effective controls on farm spending is complete and to ensure that Brussels in 1988 is not Fontainebleau revisited?

The right hon. Member for Islwyn (Mr. Kinnock) is correct in saying that the controls that we wished to be binding at Fontainebleau and which were contained in a minute and in a resolution were not binding because the guidelines were not respected. That is why we made it clear at the last European Council meeting that the controls this time must be embodied in regulations so that they are legally binding.

At that particular Council meeting, when discussing those regulations, we wanted the price controls to be automatically applied the moment it was known that there were surpluses for the year in question. It was in getting those price controls automatically applied by the Commission that called for a great deal of debate because, undoubtedly, there were countries that wished to weaken the mechanism and weaken the control of agricultural surpluses through the method by which they were applied.

I am sorry that that is a complicated answer, but it was a complicated question. It is absolutely vital that we get detailed regulations embodied so that they can be applied by the Commission and that they are legally binding.

In view of the near impossibility of getting agreement on anything in a 12-member Community, and in view of the extremely helpful role played by the Commission in supporting the manifestly sensible proposals put forward by my right hon. Friend and the Government, is it not clearly in British interests that the Commission should play a larger role in reaching decisions within the Community?

The Commission had a number of draft regulations, and let us have those as long ago as last September. The Council of Agriculture Ministers had considered them, but had not been able to agree on them. We took the three main ones, but there are many others related to other commodities.

It has been our objective, in accordance with what my hon. Friend wishes, to give the Commission a bigger role. It has to apply the method automatically. There was an attempt to take it back to the Agriculture Council, but many of us felt that, if the decisions went back to the Council, price control reductions would never be made. We are proceeding in the direction that my hon. Friend wishes.

Is this really the best that the Prime Minister can do—to report that she has no practical measures to report to the House to implement the June agreements? Is it not a sad commentary on Britain's powerlessness in the face of world economic matters that the best that the summit members can do is to stand on the sidelines and congratulate the United States Administration and Congress on reaching agreement, because they cannot coordinate their own domestic responses to this dangerous position?

May I remind the hon. Gentleman that the Community has 12 members? I am sure that, in his party, he would consider 12 members quite a lot. We have to get agreement among all those 12 members. Each of them is naturally concerned to do the best that is possible for their own country, as each of them has a veto. But we must agree on broad general principles, such as not piling up more agricultural surpluses, and methods of getting rid of the existing surpluses. That is not easy, and I do not think that the hon. Gentleman would wish to restrict debate or discussion. I hope that, had he been at that Council meeting, he would think that we had done a great deal of work which will count in reaching the final conclusions.

Does my right hon. Friend recall that the House last agreed to an increase in own resources on the clear understanding that there would be effective budgetary discipline? It would therefore be quite wrong for her to come back to the House and ask for a further increase to achieve the same objective. Will she say what steps are proposed at present to prevent the Community from spending money that it does not have?

My right hon. Friend is among the first to know about detailed and effective control. What has happened, as he will know, is that the Commission has had directions about the maximum spending for agriculture. The Agriculture Ministers, meeting in their own Council, have come up with decisions which are also binding on the Commission, but their decisions amounted to more than the money available. We simply must stop that position, and that is why the Commission is now drafting binding regulations. It is up to us, the separate member states, to ensure that those regulations are effective, however detailed they may be. That is the method by which we are proceeding, and that is why we said that we would give no figure for increase of own resources until we had made certain that the regulations would be binding.

Does my right hon. Friend accept that she is bound to be under intense pressure to reach a compromise in February, ahead of the French general election, and while the Germans hold the chairmanship? Will she undertake to resist such pressure, knowing that she will have the support of the whole House in going for a long-term deal that is delayed, rather than yet another short-term and unsatisfactory compromise?

I am grateful to my hon. Friend for his remarks. We shall indeed be under intense pressure, but we also apply intense pressure, and several of us are determined to tackle the problem of agricultural surpluses. We have put forward a specific proposal that, as long as other countries did the same, we would be prepared to depreciate the agricultural surpluses against our own budget. We thought that it would be better to start with a clean slate. However, although we were prepared to do that, not enough other countries were prepared to do the same.

The next point is to make certain that we do not build up future agricultural surpluses. Therein lies the difficulty. It is clear that a number of countries are more concerned to continue with the considerable incomes received by their own farmers, regardless of the surpluses that build up. We cannot take that view: the matter must be dealt with, and this time we must not run away from dealing with it.

Is it not the case that, despite eight years of bluster, rhetoric and phoney deadlines, the burden of the common agricultural policy on the British taxpayer is as bad now as it has ever been? Is it not further the case that the only way we shall achieve a sensible food policy in this country is when decisions are made in Britain and not in Brussels?

No, Sir. Farmers here have benefited very considerably from the common agricultural policy, as a result of which we grow a much bigger proportion of our own food than we used to. That has been beneficial to the economy. Nevertheless, our farmers are the first to understand that we cannot together go on accumulating surpluses and that we need to get rid of the overhang of past surpluses. They are being very realistic and are asking us to take proper decisions because they know that, if we go on as we are at present, there will be an emergency, and the changes that we would then have to make would be much more dramatic and not give them time to plan for the future. I think that they are behind us in the reasonable line that we are taking over the surpluses.

Does the Prime Minister agree that the intended completion of the internal market by 1992 will bring major benefits to the industrial countries, but that there is no guarantee that those benefits will be evenly distributed to the poorer regions of the Community unless there is a strong regional policy. Does she also agree that such a policy can only be implemented if she accepts the Commission's proposal for a doubling of the structural funds and for a reduction of the regions to which they apply? The regions suggested by the Commission are Portugal, Greece, the Republic of Ireland, Northern Ireland, French overseas departments and parts of Spain. Will she tell us why she has reduced the list to Spain and Portugal? Does she not agree that the reforms of the common agricultural policy will hit hard those very same regions, thereby underlining the urgency of developing that regional policy?

The structural funds have increased in real terms by 47 per cent. since Fontainebleau in 1984 — a very considerable increase. It is totally unreasonable to ask now for a further doubling of those structural funds. That is a view taken by the majority of the nations in the Community. Of course, those who get far more out of the Community than they put in wish to vote for increases in structural funds, but they, too, must be reasonable.

A part of the increase in the funds, going particularly to Spain and Portugal, we thought was justified. One must remember, in making provision for writing off the surplus agricultural produce, that Spain and Portugal were not responsible in any way for it, yet might have to pay for some of it. So it seems reasonable, as their needs are greater than those of other countries, that they should have a larger part of the increase in the funds than other countries will have.

Did my right hon. Friend point out that if agricultural expenditure is at last controlled there will be no need for any increase in own resources? Did she further point out that it would be difficult, if not impossible, to get approval for any proposal for an increase in own resources in this House?

I know my hon. Friend's views on this. I know that technically he is correct, if one could have a very sharp reduction in the amount of food being produced now and also an actual disposal of all the surpluses. But, as he knows, about half the total budget goes towards storing and disposing of surpluses and not a great deal of it goes to farmers. He is therefore asking for too much at once. We must act at a speed which our farmers can plan for and which will be realistic. That will be the view that we shall take.

Is there not a possible solution in procedure? Is it not a fact that the Agriculture Ministers, when they disagree, remit their difficulties to the Agriculture Council? Why do they not remit them to the Finance Council? Would it not be better for them to do so, for the Finance Council to set the limit and then for the Agriculture Ministers to decide how the money is to be spent? Why can the Council of Ministers not arrange for that sequence of events before Brussels, so that it is the combined Finance Ministers who decide and the Agriculture Ministers who execute?

I think that there is a fundamental fallacy in what the hon. Gentleman is saying. He believes that if all decisions went to Finance Ministers they would all be quite tough. Some Finance Ministers are not like ours — they are not nearly as good. Some Finance Ministers are very tough until it comes to agricultural spending, and then they become almost like Agriculture Ministers. I am afraid that the hon. Gentleman's scheme would collapse, which is why we must get the method closely written down in detail in the regulations. It must be automatic in its application, so that a given amount of increase in any particular product must be assessed towards the end of the year and must result in a given amount of reduction in the price for that product. That will have its impact in future years.

I congratulate my right hon. Friend on her successful opposition to the oils and fats tax, which would have hit consumers and Third-world suppliers and, paradoxically, would have taxed the consumption of vegetable oils and encouraged the consumption of animal fats.

I am grateful to my hon. Friend. The oils and fats tax was discussed four separate times at the last European Council meeting at Brussels. Four of us fought it off each time, on the grounds that if there is a surplus of something it is quite absurd to put up the price. In any case, we do not want the price to be put up for the housewife, who is the ultimate consumer. I believe that the matter is now dead. Fortunately, we received many representations from overseas countries, some of whose only possible exports—to pay for imports from other countries — are those very oils and fats that the Community wanted to tax.

The right hon. Lady said that there was a brief discussion on the Iran-Iraq war. Did she have an opportunity to discuss with the French Prime Minister the release of the French hostages? She may have seen in today's press that some of the Iranian opposition forces in France have been arrested; there is fear that this could have been part of a deal. If those Iranians return to Iran they are dead: there is no question about that. Therefore, will the right hon. Lady say what her thinking, and that of the Government, is on this matter, because we all want the hostages out, but we do not want innocent people who oppose regimes such as that in Iran to be sent back and faced with the death penalty.

The only way that I can answer the hon. Gentleman — I am not responsible for French matters—is to say, yes, I did have a bilateral discussion with the Prime Minister of France, who assured me that no ransom money at all has been paid for the hostages, and that there was no question of supplying arms to Iran. With regard to other matters, it is for the French Government to reply. I can only say to the hon. Gentleman that just because people are beng deported it does not mean that they are being deported to their country of origin.

Does my right hon. Friend believe that the lessons of Fontainebleau—[HON. MEMBERS: "—bleu."]

Order. The hon. Member for Mid-Worcestershire (Mr. Forth) must ask a question of the Prime Minster and not address those below the Gangway.

Does my right hon. Friend believe that the other members of the Community have learnt the lesson of Fontainebleau as thoroughly as we have? Does she believe that they are as committed as we are to financial discipline in the Community in the future? Will my right hon. Friend go to Brussels in February with the same ends and the same determination as when she went to Copenhagen?

The answer to the last part of my hon. Friend's question is yes, I shall go with the same determination. Not all our colleagues are as committed to financial discipline as we are, which is why we had difficulty in fashioning the details of the regulation. That, too, will be one of the things that will take up most of our time at the next Council. We shall have to do a great deal of work in the meantime to make it clear that we must have the detailed regulations and that they must be effective. We shall go with the same determination; it is quite right that it might not be settled at the next Council, but I believe that it will be settled at the following one in June.

Will the Prime Minister follow up her brief chat at Copenhagen with Mr. Haughey and request the extradition of Charles Caulfield who is living openly in the Irish Republic and is believed to have masterminded the Enniskillen Remembrance day massacre? He is believed to have been responsible, with others in a four-man hit squad, for the murder of over 100 people in Northern Ireland and is presently believed to be controlling and organising IRA activities in Fermanagh.

I let the Taoiseach know of my strong views on extradition and the changes that have been made in the same terms as I spoke about them to the House. I think that he knew the depth of feeling, both my own and that of the House. He has assured me that, if the changes are not satisfactory and do not result in effective extradition procedures, they will, as he told the Dail, be reviewed. People cannot be found guilty unless they are brought before a court, and he is anxious that those accused of crime be brought before a proper court to be found innocent or guilty.

Does my right hon. Friend agree that, although most people in Europe now accept that agricultural expenditure must be restrained, there is an unhealthy tendency to regard the social, regional and all other funds as acceptable alternatives that can therefore be increased? Does she agree that it is against precisely such forms of wasteful and arbitrary public expenditure that she has fought in this country for eight years? Will she do the same in Europe?

Yes, there is a tendency to make extra demands on the Community budget. When we bear in mind that three countries make net contributions to the budget and nine countries take out net benefits, we have quite a battle to make certain that the results are reasonable. I agree with my hon. Friend that we cannot have effective financial discipline if considerable demands are made. We must watch that expenditure as closely as we watch expenditure on our national budget.

These negotiations are dragging on a bit, aren't they? Will the Prime Minister tell us whether the negotiations to deal with the Common Market's budget and forecast bankruptcy will be settled before the merger negotiations that are taking place between the Liberals and the Social Democrats? May I give her a forecast? I think that both sets of negotiations will end in tears.

As the last set of strictly binding regulations presented to the House have proved to be a sick joke—with, for example, a record 500,000 tonnes of butter having been sold to Russia at a price of 6p a pound in the past seven months—does the Prime Minister agree that an agreement that does not curb agricultural production is nonsense? How can she call the proposals for cereals "tough", when all that is proposed is a 5 per cent. reduction in price after a level which exceeds the current level of production? Surely we need real answers to this and not just another cop-out.

The level of production of cereals is still a matter for argument and we are arguing precisely upon the point made by my hon. Friend.

As my hon. Friend is aware, butter surpluses are going down. I am afraid that one of the ways surpluses are reduced is by selling off to countries that are prepared to buy them. The only alternative would be to dispose of them as waste, and that would be repugnant to many people. We have to try to dispose of them as best we may, because I do not have the slightest shadow of doubt that the great overhang of surpluses has a damaging effect on world prices. Therefore, we dispose of them to those who can buy them and through food aid. However, butter for Africa is not in great demand.

As it is the Government's stated policy to reduce citizens' dependency on the state, will the Prime Minister confirm that that is her policy for the farming community, too? If it is not, how much support for the farming community is she going for?

That is being argued about in the Community at the moment, to determine what should be the agricultural guideline. This year, agricultural spending in the Community has been of the order of 27,000 million ecu and we are arguing about the guideline for the future. It is true that we wish to reduce dependency on the state and we must remember that the produce of most farmers does not come near the Community or the Commission in any way, because the farmers grow and sell it themselves. It is only that which goes into intervention or to export which comes with the guidelines that I have described.

Will my right hon. Friend remember the words of Cicero—that what to some is stubborness is to others pertinacity? Will she remember that it is offensive to ordinary people in this country that half the budget of the EEC is just wasted and note that the agricultural community of Scotland is delighted that she has had the principle to hold out for a real, honourable and lasting agreement?

I am grateful to my hon. and learned Friend. I believe that we are getting the Commission — and a bigger and bigger proportion of members of the Community—on our side. It will still be a problem to get rid of those surpluses. As I said earlier, I wanted a clean slate approach, under which each of us wrote off surpluses against our own budgets. It is now proposed that surpluses be written off against the Community budget—but by the year 1992, so by that time there should only be strategic surpluses and not the great overhang of surpluses that we have at present.

Despite all the Prime Minister's comments about stabilisers, the simple fact is that we have failed to achieve an acceptable solution to the common agricultural policy and to the budgetary problems of the EEC. Does the Prime Minister genuinely believe that a real solution acceptable to this country will be achieved by next spring, or will she be tempted to follow the solution that she has followed on other issues by going for the abolition of the common agricultural policy and the surcharging and disqualification of those not able to fix a budget by the appropriate time?

As the hon. Gentleman is aware, 12 of us have to agree. Most of us are determined to have agricultural stabilisers for each and every commodity, and most of us want them to be effective. There is, indeed, a problem with agricultural surpluses. I remember that, when I first came into politics, it was asserted that we would have the problem of world food shortages, yet now there are surpluses. There are enormous competitive subsidies on the part of the United States, Europe and Japan. In the economic summit, we talk about getting those down as part of a joint effort. We also discuss it in the Organisation for Economic Co-operation and Development and in the GATT round. We need concerted action by the 12 members of the Community, and with the United States, Japan and other agricultural producers.

I welcome what my right hon. Friend said about Afghanistan, but will she go a little further and say what contacts are being made with the Soviet Union in an effort to persuade it to modify its position and get out of Afghanistan as soon as possible?

Both my right hon. and learned Friend the Foreign Secretary and I spoke about the matter yesterday, and I have not the slightest shadow of doubt that it will be spoken about now by President Reagan and General Secretary Gorbachev. The Secretary-General of the United Nations, too, is now trying to reach a solution. We were particularly anxious—as the Soviet Union is negotiating through the United Nations—to make it clear that the occupation of Afghanistan was unacceptable to the West and that we called for a withdrawal during the next year. The matter will be considered further through the United Nations.

More than once this afternoon the Prime Minister has talked of the need to control agricultural surpluses. I am sure that the right hon. Lady is aware that we are not yet self-sufficient in sheepmeat production. She will be aware, too, of the importance of sheepmeat to producers in Wales and particularly of the importance of the sheep variable premium, worth about £22·8 million a year, to Welsh sheep producers. Will the right hon. Lady ensure that the price support mechanisms available after the talks are concluded will be no less than they are at present and that Welsh sheep farmers will continue to enjoy the fullest support?

We did not discuss the sheepmeat regime. It has been discussed in the Council of Agriculture Ministers, and I assume that it will be further discussed by that body. We do not have a measure in the Community of whether we are self-sufficient. If we took that measure there would never be any oils or fats imported into the Community from any other country. If we stopped other countries exporting to us—particularly some of the Third-world countries—they would have no money to buy our exports of manufactured products. We do not make it a test of production that we should be self-sufficient. If we did, it would have a very damaging effect on New Zealand, which has come a long way — and fought in two world wars — to support us. The sheepmeat regime will be considered further by the Council of Agriculture Ministers.

My right hon. Friend's statement will be welcomed by farmers and consumers in my constituency as a robust and resolute stand to get down agricultural spending as part of the budget. Will my right hon. Friend bear in mind the considerable sacrifices made by dairy farmers in my constituency since milk quotas, which they now accept, were introduced in 1984? Will she ensure that our European partners are aware that our farmers want a fair system, but a system that guarantees them a stable income?

Yes, Sir. Milk quotas are an example of a successful method of reducing agricultural production in a particular commodity. At first, they put up milk production, but now they are acting to get it down. That shows that other stabilisers could have equal success in getting rid of the surpluses that we still possess.

Does the Prime Minister agree that since 1983—during the operation of the Fontainebleau agreement—we have contributed £4·4 billion to the Common Market? Would she confirm that 70 per cent. of the Common Market budget goes on the common agricultural policy and that strong vested interests prevent the CAP from being changed and that budget being reduced? Will she also confirm that our balance of trade in manufactured goods is about £10 billion in deficit, and will she not follow the bold and courageous leadership that she so admires in Communist Mr. Gorbachev and prepare alternative plans for withdrawal from the Common Market—in case the next summit is as disastrous as Copenhagen?

No, and I was not aware that that was Labour party policy. Perhaps the hon. Gentleman is enunciating from the Front Bench below the Gangway a new policy. That would be devastating to many of our manufacturing industries because the greater part of our exports go to Europe. If the hon. Gentleman would join us in trying to get good design, low industrial costs and greater efficiency, we should be able to take advantage of the Common Market to put up our manufacturing exports.

My right hon. Friend will no doubt be aware that the farming community in the north of England will very much welcome her determination to have budgetary restraint in the community. Will she tell the House whether the opening of the Community to British financial services was considered at the Copenhagen summit, as that is looked for by the banks and insurance companies of this country?

Yes, Sir. We constantly tell our partners in the Community that while there is largely a free market in manufactured goods — there are still some barriers, although not necessarily monetary barriers—there is not a common market in services. When we get one —by 1992 — it will be of very great advantage to our service industries and we should be able to put up our balance of trade and services with the Community.

Has the Prime Minister had brought to her attention an article in The Independent last Friday by Nicholas Ashford on "The Thatcher dominance of foreign policy", which is a serious discussion about the Prime Minister's relations with the Foreign Office? Can the right hon. Lady explain why her key adviser in Copenhagen, as in so many other matters, Mr. Charles Powell, has remained in post for four years, considerably longer than would normally have been expected—Mr. Ashford's question as well as mine?

I am very well satisfied with all the advice that we get from the Foreign Office on European matters—very well satisfied.

Will my right hon. Friend bear in mind that, in the difficult negotiations in which she is to be congratulated on her firmness—in the final analysis Scottish farmers expect her to deliver a fair and reasonable agreement and they would rather wait for a proper and final agreement that is seen to be fair than have a botched-up one which, at the end of the day, will bring no credit to anyone?

I am grateful to my hon. Friend. Yes, our farmers realise that the problem must be dealt with. They want it to be dealt with so that they know how to plan for the future both in arable crops and livestock, and that is our objective.

Why does not the Prime Minister come clean and admit to the House that the Copenhagen summit was a complete fiasco and a failure with a lot of discussion about matters over which the EEC has effectively no control, such as the Iran-Iraq war and the Soviet occupation of Afghanistan? Since she is so concerned about disposing of the food mountains and was unable to reach an agreement on the CAP, why does not she dispose of the food mountains to the pensioners of Britain this Christmas? In my constituency of Newham, we have tonnes of beef and butter. Will she tell the pensioners of Newham, and, indeed, the rest of the country, that they can get their NHS choppers into those food mountains this Christmas?

First, the hon. Gentleman was not at Copenhagen. It was not a fiasco; it was a very good meeting and very thorough. The hon. Gentleman has a habit of talking about meetings at which he was not present and about which he does not know. If one were to dispose of the present butter surpluses, they would immediately be replaced by new ones, because people would not buy the butter that is presently being produced but would go for the older butter, so there would be no increase in consumption.

Yes, Sir.

In the discussions about reducing the grain and cereal surpluses, was there any discussion about the use of nitrate fertilisers and their reduction, in view of their disastrous effect in some parts of Britain and also in line with the EEC's stated policy of balancing the agricultural and environmental needs of different nations?

No, we did not discuss that matter. We were concerned to make sure that, if there were increases in production, there would be an automatic reduction in price. Of course, increases in production can result from an increase in area or an increase in productivity. There are other measures to deal with farming by more natural methods, but we did not discuss them.

Rate Support Grant (Wales)

4.13 pm

With permission, Mr. Speaker, I should like to make a statement about the Welsh rate support grant report 1988–89 and the supplementary reports for 1984–85 and 1985–86, which I have today laid before the House.

I am today announcing the details of the 1988–89 settlement to the Welsh Consultative Council on Local Government Finance. Copies of the text of my statement to the consultative council, together with a number of key statistical tables, have been placed in the Library.

Before I give details of the settlement I shall refer briefly to the second supplementary reports for 1984–85 and 1985–86, which are based on authorities' audited outturn expenditure and are intended to be the final reports for those years. The 1984–85 report increases aggregate Exchequer grant by £9·5 million and makes provision for an increase in relevant expenditure and additional grant holdback. The 1985–86 report increases the aggregate Exchequer grant by £9·7 million. It restores grant previously withheld and increases provision for relevant expenditure.

I announced my proposals for 1988–89 to the House in July, and these have been the subject of consultations with the local authority associations. The report takes account of their views. The settlement for 1988–89 has six main elements. First, provision for relevant expenditure will be set at £1,894 million. This is £112·9 million or 6·3 per cent. over 1987–88 budgets, 1·8 per cent. over the expected rate of inflation and £8 million higher than the amount that I announced in July. Secondly, the current expenditure provision is set at £1,640 million, an increase of £81·9 million or 5·3 per cent. over 1987–88 budgets and 0·8 per cent. above the expected rate of inflation. Thirdly, aggregate Exchequer grant is £1,256 million, an increase of £80·9 million or 6·9 per cent. over last year. Fourthly, specific and supplementary grants total £241.2 million, an increase of 5·8 per cent. on 1987–88. Fifthly, domestic rate relief grant remains unchanged at 18·5p in the pound, and in aggregate totals £27 million. Sixthly, block grant is £987·8 million, an increase of £66·9 million or 7·3 per cent. over last year.

I have decided to retain the same block grant mechanisms as those used in the present year and have restricted changes to the methodology used in assessing needs to those requested by the local authority associations. I have thus provided the stability sought by the local authority associations. This is particularly important as the present rate support grant system reaches its penultimate year. The threshold and the slope of the poundage schedule remain unchanged, and multipliers will limit the effects of certain year-on-year changes in grant entitlement.

The settlement provides significant rating benefits for councils which increase spending by less than the anticipated rate of inflation. Their decisions will be rewarded with additional grant, with the obvious and welcome consequence of lower rate rises. Authorities' grant entitlements are entirely the outcome of their own spending decisions. They will get the grant to which they are entitled.

The 1988–89 settlement is fair and realistic. The increases in all the main components — relevant expenditure, current expenditure, aggregate Exchequer grant and block grant—are well above the forecast rate of inflation. I hope that all councils in Wales will respond to this settlement, in the interests of their ratepayers, by keeping spending close to my plans, by making further progress towards greater efficiency and by securing moderate wage increases. They have a responsibility to their ratepayers to do so and to budget for low rate rises.

I thank the Secretary of State for the fact of the statement, if not for its contents. It makes a pleasant change from Government by press release.

Will the right hon. Gentleman accept that the key figures for the level and quality of our services are the current expenditure figure and the level of grant? Will he further confirm that, because the current expenditure figure covers salaries, wages and transport, it inevitably rises faster than the retail prices index, which, after all, reflects only the average spending pattern of the average family, so comparisons with a 4·5 per cent. change in the cost of living are irrelevant, inadequate and misleading?

In that context, will the right hon. Gentleman recognise that his officials, in conjunction with the county officials, take part in an expenditure sub-group at which they try to agree the expenditure figure that will be necessary to sustain the existing level of services based upon the existing policies? Does he confirm that they have identified that the standstill increase would mean plus 11 per cent. rather than the 5·3 per cent. that he has announced today? That would require £1,700 million, not the £1,640 million that he has announced today. Therefore, we are faced with a shortfall in Wales of £60 million just to sustain services.

Will the right hon. Gentleman further confirm that the 5·3 per cent. increase is below the 7 per cent. increase in spending that has been allowed for England, and that that change alone has robbed Wales of £27 million?

If it is not true, the right hon. Gentleman can show why later. I shall be only too happy if he does so.

Will the right hon. Gentleman also bear in mind that the £60 million shortfall will be seen either as the scale of cuts that are necessary in services, or as the extra burden that will have to be borne by the Welsh ratepayers? In that context, does he recognise that, because of the penalty system, his statement means that cuts in services will be accompanied by increases in rates in Wales?

Will the right hon. Gentleman confirm that yet again the percentage of Government grant has decreased from 66·7 to 66·3 per cent., itself a cut of £6 million? Does he recognise that, as a result of that percentage change, compared with the percentage of rate support grant that was paid in 1978–79, since the Government took office Wales has suffered a cumulative loss of rate support grant of £750 million? That is a massive deflation for Wales. Councils have had to find £750 million since then to replace that Government grant. It means that a sum of £750 million has been transferred at a cost to the Welsh taxpayer and that £750 million is not available for other desperate needs in Wales.

Will the right hon. Gentleman bear in mind that today's inadequate and pathetic announcement follows last week's announcement, by written answer, of capital expenditure for the councils next year which, on his own terms, represents a real cut of £10 million?

On a point of detail concerning the first sub-paragraph on page 2 of the statement, dealing with relevant expenditure, will the right hon. Gentleman state whether the £8 million extra that is referred to is mainly an adjustment that is needed to recognise the fact that in the past public debt charges have been based on public expenditure White Paper figures which have been wildly out of date and which have led to the Welsh authorities being robbed in the past?

Does the right hon. Gentleman realise that the failure to recognise the impact of salary increases —[Interruption.] They are important to the people of Wales. Conservative Members may not want the people of Wales to know about this, but I would bet that the press handout is several pages longer than the statement that was given to the House. We shall ask our questions whether or not the Government like it. Does the right hon. Gentleman realise that the failure to recognise the impact of salary increases over the whole range of local government employees covers the teachers' increase of 16 per cent., but refuses to recognise the repercussive effect of that on, for example, further education, for which a 4 per cent. figure is insisted on and used in the calculations?

Will the right hon. Gentleman confirm that a 4 per cent. figure was used in relation to manual workers, for whom there has been a settlement of 10·6 per cent.? Will he also confirm that, among manual workers, home helps have received a 17 per cent. increase — not because of acquisitiveness on their part, but because they have been asked to change their patterns of work? They have been asked not only to do home help work, but to become carers and to take on the work that was previously done in old people's homes, which are now being closed and cut.

Will the right hon. Gentleman confirm that there is no provision in the settlement for the fact that next year districts will incur the cost of starting the planning stages, which will be considerable, for the introduction of the community tax? Will he further confirm that the settlement does not make any provision for the extra costs that councils will incur in preparing for the Government's education initiatives, such as the decentralisation of school spending, which again must be prepared in advance, and therefore, must be financed by ratepayers? [Interruption.]

Order. In fairness to the House, I feel bound to say that there will be a debate on these matters and that many of the issues raised by the right hon. Gentleman can be gone into in detail then. This is the opportunity to ask questions.

Every one has been a question, Mr. Speaker. Indeed, every one has been a different and relevant question to which the people of Wales want an answer.

Is the right hon. Gentleman aware that last year his predecessor stated that predictions of an increase of 10 to 20 per cent. in rates would not be necessary because last year's settlement had been a "very good" one? Indeed, he said:
"In no case will the rate bill in districts increase by anything like that amount."
Is the right hon. Gentleman aware that history has proved that wrong and that 10 of the 37 districts increased their rates by 10 per cent., that two did so by over 20 per cent.

and one by 26 per cent.? That happened following what was supposed to be a "very good" settlement. The right hon. Gentleman has made no such grandiose claims for this settlement, so what does he expect the rate increases to be this year? Does he agree that as a result of this settlement rate increases will be greater than the rate of inflation generally and, in some cases, possibly as much as 15 per cent.?

In the past eight days the Secretary of State has announced cuts in councils' capital grant and a standstill in our health provision in Wales. Today he has announced a cut in council-provided services, coupled with a guaranteed increase in rate demands. How does the right hon. Gentleman account for his public protestations of concern and care for Wales, when his actions are calculated to deepen and worsen all the problems of Wales?

I have just checked, and my press handout is about half the size of my statement to the House, but not one tenth of the size of the statement that the right hon. Gentleman has just made. The right hon. Gentleman concluded with references to cuts and reductions, not one of which is true. My statement represents a real increase in the rate support grant. As regards local government expenditure, the increase that was announced for health expenditure was exactly the same. What amazes me is that the right hon. Gentleman served as a Minister in a Labour Government who cut capital expenditure on health by 30 per cent. in one year and reduced nurses' salaries by more than 20 per cent. over the whole period of that Government.

No, I am answering it.

Local authorities have, of course, made estimates and said that they would like more money. However, their highest estimate was for an increase of a further £60 million. What does the right hon. Gentleman think the local authorities were saying during the years when local authority expenditure in Wales decreased, because over the four years of the previous Labour Government it decreased by 4 per cent.? What did the local authority associations say then? I am delighted to say that, under this Government, local authority expenditure in Wales has increased by 11 per cent. in real terms. That should be compared with the 4 per cent. reduction of the previous Labour Government.

Perhaps the right hon. Gentleman wishes to concentrate, as he did, on a comparison with England. As the right hon. Gentleman has forced an argument, I shall give him those comparisons with England and with Scotland. The increase in relevant expenditure in Wales will be 6·3 per cent., and it will be 3·6 per cent. in England. Similarly, the increase for Scotland will he 3·6 per cent., compared with the 6·3 per cent. for Wales. The figures for the aggregate Exchequer grant show the same, that Wales has done very well, and I am delighted about that.

The right hon. Gentleman said that we had forgotten about all the wage increases. There have been increases for manual workers, and it is outrageous to suggest that the main part of the manual workers' increases is for home helps who will care especially for old people. If the right hon. Gentleman knows anything about the totality of the expenditure on manual workers, he should know that that is a small fraction of the total. He is obviously saying to the people of Wales, "We are quite happy to have large increases that are way above the rate of inflation, but we expect the Government, not the people of Wales, to finance them." Wales is to receive a rate support grant of 66 per cent. from the Government, and again that is far higher than the figure for England or Scotland. Indeed, if councils are prudent and sensible and improve efficiency, rate increases in Wales will be low this year because of that totality.